Most Corporations to be Equitised in 2005

On February 24, a conference was held to review the equitisation process over the past decade with a main focus in the 2001-2005 period. Also, the conference discussed solutions for promoting equitisation in 2005 and the coming years.

Talking with the press at the conference, Permanent Deputy Prime Minister Nguyen Tan Dung, head of Steering Board for Enterprise Renewal and Development, stressed that the vital role of State-owned enterprises had been affirmed but the renewal and re-organisation were needed in a manner of multi-ownership, so that they would become more dynamic and effective.

The Government has planned to equitise most corporations, except enterprises in some key sectors, relating to national security and defence, which have been stipulated by the law.

Dung said that there were two ways for equitisation of corporations. For large-sized corporations which play an important role in the country’s economy, if they cannot be equitised as a whole immediately, the equitisation should be implemented in their member enterprises. At the same time, corporations should be converted into holding companies. The second way is to equitise corporations completely.

According to guidelines of the Steering Board for Enterprise Renewal and Development, corporations N⁰ 90 and 91 will be equitised according to the first method. The remaining 60 corporations will be equitised according to the second one, or their member enterprises will be equitised first and the corporations will become holding companies before being equitised. In the first half of 2005, three corporations, including the Trade and Construction Corporation, the Vietnam Electronics and Informatics Corporation and the Vietnam Construction Import and Export Corporation (VINACONEX) will be equitised. Their models will then be mirrored nationwide.

Pham Viet Muong, deputy head of the Steering Board for Enterprise Renewal and Development, said that in 2005, more major corporations in key sectors would be equitised. The Electricity Corporation of Vietnam (EVN) has planned to equitise seven electric power plants with capital reaching billions of Vietnam dong and the Vietnam Cement Corporation will equitise most member enterprises.

Answering whether the 2005 equitisation plan is completed or not, Muon said that 2004 was the first year Vietnam had equitised more enterprises than the yearly plan. With such a speed, Vietnam may complete its yearly plan for 2005 despite the fact that there would be more difficulties due to an increase of equitised enterprises.

Muon said that the two biggest difficulties, hampering the equitisation process in the past years included corporate finance and awareness problems which were being removed. The Decree 187/ND-CP has helped enterprises overcome difficulties in solving financial issues for equitised enterprises. In addition, the awareness of the necessity of equitisation has been improved among cadres and workers of enterprises. In the coming time, the Ministry of Interior will complete a regulation on responsibility of heads of enterprises to clarify responsibilities of individuals during equitisation. Efforts will be made for the equitisation process to be completed in 2008.

The equitisation of State-owned enterprises has been implemented in Vietnam since 1992 but it has recorded good results since the issue of the Resolution of the third plenum of the Party Central Committee. Accordingly, the Prime Minister guided agencies, ministries and localities, corporations N⁰ 91 to develop their master plans for renewing State-owned enterprises with a focus on equitisation. After more than ten years’ implementation of the programme on re-arrangement and renewal of State-owned enterprises, which policies has the Government issued for 2005?

Diversity of ownership

According to figures from the Steering Board for Renewal of State-owned Enterprises, since late 2001, the Prime Minister has approved 104 projects on equitisation. Under these projects, 2,053 among 4,724 State-owned enterprises would be equitised. Of this figure, the State would hold controlling stakes in 1,042 enterprises. Based on such targets, many enterprises, corporations have gained good results during equitisation. These include enterprises in the Ministry of Construction, the Ministry of Industry, the Vietnam Post and Telecommunication Corporation (VNPT) and the Vietnam Chemical Corporation. Recently, the Prime Minister approved projects on equitisation of the Trade and Construction Corporation under the Ministry of Transport, and the Vietnam Electronics and Informatics Corporation. Accordingly, the State’s stake in the Trade and Construction Corporation will be maintained and bonds will be issued to attract more capital while part of the State’s stake in the Vietnam Electronics and Informatics Corporation will be sold.

It is possible to say that the conversion of the two corporations into enterprises of multi-ownership would become an important step in promoting equitisation of State-owned enterprises and corporations in the spirit of the resolution of the ninth plenum of the Party Central Committee. Under the resolution, the Prime Minister has decided to expand the scale and list of equitised enterprises. As a result, some large-sized enterprises have been equitised, which are valued at thousands of billions of Vietnam dong with the State’s capital reaching hundreds of billions of Vietnam dong. These include the VINAMILK valued at VND 2,500 billion, of which the State’s capital accounts for VND 1,500 billion; the Hinh-Vinh Son hydro-electric power plant, valued at VND 2,114 billion, of which the State’s capital accounts for VND 1,523 billion; and the Ho Chi Minh City Insurance Company, valued at VND 1,313 billion with the State’s capital accounting for VND 650 billion.

Thanks to equitisation, the number of State-owned enterprises has reduced. In the past, State-owned enterprises were widespread in all fields and industries. Now, they concentrate in 39 key fields. The capital of enterprises has significantly increased. Average capital of State-owned enterprises has increased from VND 24 billion in 2001 to 63.6 billion. Accordingly, corporate finance has become healthier with the restructuring of debts and addressing outstanding assets and materials, reducing State’s capital or selling to debt purchasing companies.

During equitisation, State-owned enterprises have further accessed the market, mobilising over VND 12,000 billion in capital. Enterprises in Ho Chi Minh City alone have mobilised VND 1,551 billion. At the same time, the State has gotten VND 10,169 billion back for re-investing in State-owned enterprises.

Reports from agencies, ministries and localities show that charter capital of equitised enterprises, which have been in operation for one year, has increased by 44 per cent. The Transport Joint stock Company has seen its capital increase by 40 fold. This figure was put at 11.2 fold for the Kim Dan Joint stock Company, 13 fold for the Refrigeration Electrical Engineering Corporation, 7.3 fold for the An Giang Plant Protection Joint stock Company and four fold for the Cable and Telecommunication Material Joint stock Company.

Equitisation remains slow

Evaluation from the Commission for Enterprises Renewal and Development points out that even though the basic targets of equitisation have been achieved, the number of equitised enterprises remains low, the equitisation process remains slow and it takes a long time to equitise an enterprise or a corporation. The equitisation result was equal to 79 per cent of the master plans of ministries, agencies and localities, as well as corporation N⁰ 91, which were approved by the Government. Equitisation in many ministries, agencies, localities and corporations remains poor, equal to less than 50 per cent. These include the Ministry of Culture and Information, the Ministry of Defence, the Ministry of Fisheries, the Ministry of Science and Technology. No single enterprise in the Vietnam Shipbuilding Industry Corporation, for example, has yet been equitised even though the corporation’s equitisation plan has been approved.

The survey result of a project of technical support for supervision of ownership transformation in State-owned enterprises shows that at 943 equitised enterprises, time for equitising an enterprise was cut from 512 days in 2001 to 473 days in 2004 but it remains too long (it takes 554 days for equitising enterprises in corporation N⁰ 91, 443 days for enterprises in ministries and 422 days in localities). A big difficulty during equitisation is that the State’s capital still accounts for a large proportion in charter capital of enterprises in which the State is unableto hold control stakes. This is familiar in State-owned corporations. The Ministry of Transport, for example, has 82 per cent of equitised enterprises with the State’s capital dominating. Furthermore, many workers in equitised enterprises are unable to buy large volume of stocks apart from their preferential stocks while many others have sold their preferential stocks after they bought them. Shareholders occuppy 15.4 per cent of charter capital of equitised enterprises. As a result, strategic shareholders do not have many opportunities to play a certain role in making decisions on enterprises’ production and business activities. Closed equitisation remains popular with 860 enterprises, or 38.4 per cent, having no stocks sold to outside shareholders. The number of such enterprises was put at 28 out of 28 equitised enterprises in Hai Duong province and 36 out of 59 enterprises in the Ministry of Trade.

1,460 enterprises to be equitised in 2005

According to figures of the Steering Board for Enterprise Renewal and Development, the number of State-owned enterprises will 100 per cent State-owned capital will remain at 1,200, or 736 enterprises less than the master plan. The 736 enterprises will be equitised. For enterprises, which cannot be equitised, they will be sold or leased. Therefore, 1,460 enterprises will have to be equitised in 2005.

In the short-term, member enterprises of 18 major corporations will be equitised even if the corporations are yet to be equitised completely. The corporations will be converted into holding companies. These include the Vietnam National Textile and Garment Corporation, Vietnam Airlines, the Electricity Corporation of Vietnam, the Vietnam Chemical Corporation, the Vietnam Post and Telecommunication Corporation, the Vietnam Shipping Lines Corporation, the Southern Food Corporation, the Agricultural Machinery Corporation and the Vietnam Bank for Agriculture and Rural Development.The 60 remaining corporations will be equitised completely or all of their member enterprises will be equitised, so that they will operate as holding companies.

The Steering Board for Enterprise Renewal and Development has set a target that the equitisation of three corporations, the Trade and Construction Corporation, the Vietnam Electronics and Informatics Corporation, and the VINACONEX in the first half of this year, while implementing a project on equitisation of the Vietnam Agricultural Material Corporation.

• P.V